Michael Aneiro in a separate Barron’s post reports the big junk bond ETF trade has drawn the attention of industry analysts.
“[I]n this case, the ETF redemption mechanism was used to gain access to a significant amount of high yield bonds while avoiding the high yield secondary market altogether,” Barclays strategists said in the report. “The maneuver adds to the already-strong evidence that cash market liquidity remains challenged, as less traditional avenues for accessing liquidity in the cash market have become more attractive.”
Dow Jones Newswires reported that the investor may have tried to capture the premium or “spread” between the value of the high-yield ETF’s shares and the underlying bonds.
CreditSights analysts in the report said markets “are abuzz” with the trade and what it means for the ETF market, and other investors in such funds.
“Widely reported comments by a member of a firm that brokered the trade indicated that an investor assembled a position in the ETF with the intent of exchanging the shares for the underlying bonds as a means to implement a cash-bond portfolio,” they said.
SPDR Barclays Capital High Yield Bond ETF
